US regulators ask the public for fresh ideas to combat rising payments and cheque fraud.
The Federal Reserve Board has requested public feedback on potential actions to help consumers, businesses and financial institutions reduce the risk of payment and cheque fraud.
Opened on June 16, the request for comment highlights five key areas where improvements could strengthen efforts against fraud. One area is how coordination can be enhanced between federal agencies, the Fed, and industry participants to create a more unified response.
“Today’s interagency announcement is a welcome first step in the efforts of the federal banking agencies to combat the increasing occurrence of fraud, particularly cheque fraud,” said Vice Chair for Supervision Michelle Bowman.
Alongside collaboration, the agencies aim to expand education initiatives targeting consumers, businesses and the payments sector to raise awareness of fraud risks. Strengthening regulation and supervision, especially concerning cheque fraud, is another important focus noted in the announcement.
Effective data collection and information sharing are also seen as crucial to spotting trends and enabling faster responses. Lastly, the Federal Reserve Banks are looking to advance their tools and services to help further reduce fraud across payment networks.
The rise of cheque fraud
Cheque fraud refers to the illegal use or alteration of cheques to steal money or goods. Over recent years, it has become an increasingly costly problem for businesses and financial institutions across the US.
According to a 2024 report from the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), financial institutions filed Suspicious Activity Reports accounting for more than $688m in suspicious transactions linked to mail theft-related cheque fraud during the six months following a 2023 FinCEN alert.
This data covers 15,417 reports submitted by 841 financial institutions nationwide.
FinCEN’s analysis revealed that nearly half of the stolen cheques were changed and then deposited, while another quarter were used as templates to produce counterfeit cheques. These sophisticated methods allow criminals to bypass direct interactions with bank staff, making detection more difficult.
A “slow” response from US regulators
In her statement, Bowman highlighted the significant rise in cheque fraud over recent years and the damage it has caused to community banks, consumers, and businesses, which she calls the “victims” of this growing problem.
Despite these harms, she believes regulators have not done enough. “While this has been a well-known problem for several years, efforts by regulators have been slow to advance, and seem to have done little to address this growing threat,” Bowman said.
She stressed the need for a comprehensive strategy to develop and implement a coordinated approach focused on preventing payments fraud and supporting consumers, businesses and institutions.
Across the Atlantic, the UK has faced a sharp increase in authorised push payment (APP) fraud in recent years. This prompted the Payment Systems Regulator (PSR) to introduce new reimbursement rules for the industry.
Although these rules were initially criticised and slightly modified following industry concerns, recent data shows APP fraud levels have fallen since their introduction. This experience offers two key lessons for the US: collaboration and engagement with industry experts are essential to crafting effective regulation, and despite scepticism, regulation can work.
Bowman concluded: “I am committed to working together with a wide range of state and federal partners, including law enforcement, to address this issue. I look forward to reviewing the public feedback in response to the request for information.”
